The History of John D. Rockefeller and American Oil

Introduction

John D. Rockefeller is considered as the man behind the creation of a successful American oil industry, who became a symbol of both the best and worst aspects of the new American approach to business. Rockefeller was born to a traveling peddler father named William Rockefeller, who happened to be a large and powerful man of questionable character, and it is from him that John D. Rockefeller claims to have derived his entrepreneurship skills.

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The father, who it is believed employed quack methods and invented quack treatment by using harmless concoction as miracle cures, had also other means or ways of getting money. He would sometimes trade in horses, shoot at marks, run, wrestle or jump against the best local cap and feathers (Winkler, 2007, pp 13). Furthermore, the man is described to have possessed such characteristics as; “pre-bellum racketeer, shrewd, swaggering, and generous and a hale felloe” (Winkler, 2007, pp 13).

From these characteristics of his father, John D. Rockefeller acquired his earliest knowledge of business principles. In many autobiographies, Rockefeller junior, with humor, acknowledges the values of his father’s teachings by saying, “to my father I owe a great debt in that he himself trained me the practical ways, he was engaged in different enterprises; he used to tell me about these things, explaining their significance and also he taught me the principles and methods of business” (Winkler, 2007, pp 14).

Therefore, John Rockefeller was never a poor and never struggled as a country boy. He never knew the biting pinch of abject poverty because his father developed too many ways of getting money. Furthermore, the father set aside 1000 dollars as a gift to each of his three sons at twenty-one whereby, John Rockefeller share was given to him when he was nineteen to enable him to go into business for himself and which he was to pay his father an interest of ten per cent for two years (Winkler, 2007, pp 15).

John D. Rockefeller Early Life

At school, John Rockefeller was not brilliant but he was diligent and thorough. His dream and desires were to get into the business, and after one year in school, his father suggested that he attend the commercial college in Cleveland for a few months. It is at the college that John learnt about book-keeping and the fundamentals of commerce. In 1855, John Rockefeller, aged sixteen, set out to seek employment having confidence in his budding talents but jobs were scarce.

Earlier, John had worked in various organizations mostly as a volunteer in Cleveland before the Civil War. For days and weeks young John trampled the streets, the graves, remaining self-centered and tenacious in his quest (Winkler, 2007, pp 34). Indeed, he had served as clerk without compensation to the board of trustees at Central High where he was nicknamed Deacon.

John Rockefeller was a religious young boy; it is said how he memorized the passages of the Scripture and also the hymns. At night when his fellow age mates were sound asleep, John would be quietly at work on the church accounts, adding, subtracting and balancing. Fortunately, his prospective employers realized early that the young Rockefeller was equipped for a business career for he had grasped the laws of commerce very fast (Winkler, 2007, pp 35).

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Having rented a house which he paid one dollar per week, he would, every evening, return to his room, footsore and discouraged but to him, he was not just about to go back to the country. Determined at all odds about becoming rich, he realized that Cleveland was the place where one could make good bargains, save money and permit it to work for its returns (Winkler, 2007, p. 36).

The Emergence of Standard Oil Company

In 1856, Rockefeller partnered with Clarke where they pooled their earnings and started a produce commission business on the Cleveland docks – the venture succeeded. Indeed, during the first year, the company is believed to have made 450,000 dollars.The oil boom hit Ohio in the early 1860s and interesting to John, he saw an opportunity in this type of venture. In the same year, Rockefeller sold his share of the commission business and immediately he and Clarke were joined by Samuel Andrews, where they invested 4000 dollars and promised to give more if it was necessary.

Their partnership was bound to succeed given that each of the partners was endowed with unique skills, whereby, Andrews, being a mechanical genius was given the responsibility of handling manufacturing activities where he ensured availability of sound processes and oil quality; while Rockefeller was responsible for conduct of business, more so trading operations due to his knack of entrepreneurship. As the business, together with Cleveland grew even more, Rockefeller became dissatisfied with waste and disorder of the middlemen and unnecessary exploitation, thus he used his knowledge of business to shut them out of his business by devising a process of sourcing his oil directly from the wells and making his own barrels (Tarbell and Schechter, 2009, pp 43)

By the age of twenty-five, John, D. Rockefeller had bought out his partners and by then he was operating the largest refinery in Cleveland (Carter, 2007, pp 227). As the firm grew they opened a second refinery named William A. Rockefeller and Company and incorporated a new partner named H M Flagler, and established an oil deport in New York; however, in the company, John Rockefeller remained the head.

In 1870, after John Rockefeller became an active partner in the refining business, he combined all his companies into one and formed the Standard Oil Company with a capital base of 1,000,000 dollars together with other partners including Henry M. Flagler, Samuel Andrews, Stephen V. Harkness and William Rockefeller. Rockefeller attributed the reason for this kind of partnership to the desire to unite their skills and capital in order to carry on a business of some magnitude and importance.

The company which grew during the decade to control over ninety per cent of the USA refineries was attributed to John Rockefeller’s extraordinary capacity for bargaining and borrowing, thereby making himself the wealthiest in America at the age of forty. Basically, John Rockefeller managed all these through good fortune and employing ruthless determination (Carter, 2007, pp 227). In addition, Rockefeller had the ability to even make the smallest bargain.

During the depression of 1873, Standard Oil bought up many bankrupt refineries (Gosling, n.d). The company also negotiated for preferential treatment from the railroads whereby they promised large oil shipments in exchange for lower freight costs. Indeed, John Rockefeller did everything that was necessary in order to eliminate competition such as spying on his competitors to lure a way their customers, or by selling his products so cheaply below the production costs that other competitors lost their customers and eventually they were driven out of the market (Carter, 2007, pp 227).

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Genesis to Dissolution

Standard Oil Company developed a policy of expansion in a hurry and in 1879; the company obtained 90 per cent of the refining business. Standard Oil was able to control the oil sector through rebates and discriminating rates obtained from the railroads, monopolization of the pipe lines extending from the oil fields to the refineries, local price cutting, absorption of competing refineries and also restraining contracts with competitors. In effect, the company was accused of using unfair methods of competition by means of which it built up and maintained its monopoly.

Conviction among many people in the oil regions became prevalent that, united opposition to the Standard was hopeless. However, two striking and unique instances of individual opposition were shown by the firms owned by Scofield Shurmer and George Rice (Thompson, 2009, pp 67). Scofield and Shurmer entered in to agreement with the Standard Oil Company that was to see the company limit its annual production of refined oil to 85,000 barrels in return for equal transportation rates received by the Standard.

This arrangement resulted into Sconfield and Shurmer’s firm becoming profitable and the firm began to exceed slightly its 85,000 barrels, and decided to offer Standard Oil, one-half of the excess profit. Realizing this, Standard Oil refused the offer and immediately shut off the firm’s supply of crude oil which came through the Standard’s Oil pipe line. Not contended with the actions it had taken, Standard Oil still proceeded to court in order to force the Sconfield and Shurmer firm to fulfill its agreement, an agreement in restraint of trade. However after a number of years, the firm brought suit against the railroad for giving rebates, a case that it won in 1892 and secured equal rail rates with the Standard Oil.

In 1885, George Rice brought suit a gainst the receiver of Cincinnati and Marietta Railroad, which revealed an agreement between the Standard and the railroad whereby Standard got a rate of ten cents per barrel and for others, the rate was fixed at thirty-five cents. This exposed a very large discrimination that existed; indeed, within twelve days after the court had ordered that the records be produced, Standard paid Mr. Rice all that it had received from the railroad on his shipments (Thompson, 2009, pp 68).

At the same time, the Independents met a lot of opposition from the Standard in their attempts to construct a pipe line to the seaboard. They sought legislative measures to restrict the excessive pipe-line rates and to require the delivery of oil to all persons desiring oil at the different shipping points, but all the bills failed due to the influence of the Standard Oil (Thompson, 2009, pp 68).The Standard Oil Company continued to participate in all manner of business ills that put its competitors at a disadvantage position (Thompson, 2009, pp 74-76). In 1890, the state of Ohio brought suit against the Standard Oil Company of Ohio claiming that the company had violated the laws of the state by entering into agreement of 1882 and asking that its charter be forfeited (Thompson, 2009, pp 72).

The case took two years and in March 1892, the Supreme Court of Ohio rendered a decision declaring that the trust agreement was illegal. The court ordered the company to cease its connection with the trust and immediately the company announced that the entire trust would be terminated (Thompson, 2009, pp 72). Nevertheless, the trustees assumed the title of ‘liquidating trustees’ and went through with the intended dissolution procedures.

Conclusion

John, D. Rockefeller believed that the power of making money was God’s gift and that he had a duty to go on making more money and also use the money for the benefit of other humankind. As from a young age, John was determined to do business; his early exposure to the business skills of his father also helped him. He shunned all kinds of pleasures that would have detracted his efforts of becoming successful in life.

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Therefore, John D. Rockefeller lived for ninety-seven years in which he built one of the world’s biggest financial nest eggs and he also played one of the world’s biggest roles. As a business magnet, he pioneered many features of modern business, from the global monopolies to the management committees. He was also hated due to his business crafty methods but at the same time, he became one of the world’s biggest backers of charities for helping humankind.

References

Carter, P. (2007). American History. Toronto, Emond Montgomery Publication.

Gosling, T. (N.d). Rockefeller and Standard Oil… Rags to riches. Web.

Tarbell, M. and Schechter, D. (2009). The History of the Standard Oil Company. Maharastra, Cosmos, Inc. Web.

Thompson, M. R. (2009). Trust Dissolution. BiblioBazaar, LLC. Web.

Winkler, J. K. (2007). John D. RockeFeller: A Portrait in Oils. Maharastra, Cosimo, Inc. Web.

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